The Government plans to implement major changes to local government funding from 2026. 

In exchange for more flexibility, local authorities are expected to distribute funding to where it is needed most and to deliver the Government's three national priorities:

1. People who draw on care and support, and their carers, experience high-quality adult social care provided by a skilled workforce.

2. People who draw on care and support are supported to promote their independence, where possible, and have choice and control over their support.

3. People who draw on care and support experience joined-up health and social care services at a neighbourhood level.

These priority outcomes and expectations do not replace or override local authorities’ statutory duties under the Care Act 2014, nor does the Government's policy paper amount to statutory guidance. However, the objectives are designed to support local prioritisation and delivery, laying the foundations for a national care service.

From principals to practice

To bring these outcomes to life, the Government has outlined practical steps and approaches that local authorities can take. These expectations should guide local authority decision-making for service design, strategic planning and resource allocation, and work with local partners.

With a focus on responding to local needs, there is significant emphasis on the need for co-production with the people who draw on care and support, unpaid carers and sector partners who deliver preventative services. 

Local authorities should also consider how safe and appropriate housing options, education and employment opportunities can help or hinder the health or their local population. The drive for integrated services means building skilled, multidisciplinary teams who are able to support people with more complex health and care needs. Many services providers have seen increased demand to deliver delegated health activities and we expect this to be a continued area of growth.

Whilst Market Sustainability Plans have previously identified local needs and gaps in delivery, local authorities must now go a step further and co-produce neighbourhood delivery plans which embed services into the local community infrastructure.

Funding allocation

Existing individual grants, including the Market Sustainability and Improvement Fund and Social Care Grant, will be consolidated within the’ Fair Funding Allocation' (paid through the Revenue Support Grant): removing the need to track spend against separate grants. However, the Government will be assessing how local factors inform local authority spending decisions and make progress towards the priority outcomes.

Local authority notional allocations will be calculated based on each local authority's current spend on adult social care, adjusted for expected changes in the overall Core Spending Power (CSP) by 2028 to 2029. Where a local authority’s CSP is growing by less than inflation, its notional allocation will be set to grow in line with inflation (inflation is expected to be 6.3% between 2026 to 2027 and 2028 to 2029). 

This funding will not be ring-fenced - it is for councils to decide how best to use the income to fund local services. This will be welcome news to those local authorities whose geography and local population bring unique challenges and where partnership working has unlocked innovative solutions to delivering holistic care and support services. However, we are still likely to see problems where local authorities and sector partners (whether they be providers, regional care associations or advocacy groups) lack a sufficient voice at the NHS commissioning table.

Next steps

Local authorities are being given a clear message that those who have invested in good local relationships will be given the freedom to do things differently. When viewed alongside recent updates to the Provider Selection Regime and the Procurement Act 2023, there is plenty of scope for creative commissioning. 

The challenge then comes with finding the time and resource to build capacity in a sector that has been long neglected, whilst commissioners face the parallel challenge of preparing for Local Government Reorganisation.